PK's view on Indian Tax system. Enjoy it!
CA Umesh Sharma
Arjuna (Fictional Character): Krishna, Aamir Khan's recently released movie, PK, is in Limelight. Tell me, if this character 'PK' participates in a T.V. talk show on the topic of Taxation, what fun it will create? In this way we can spread awareness of taxation among people for following tax laws.Krishna (Fictional Character): Arjuna, in the movie, Aamir Khan has played the role of an alien coming from another 'Gola' (planet). After coming to India, he portrays his opinions on fearfulness, superstitions and castism in an amusing manner. So now let's correlate various scenes from the movie with income tax, sales tax and other taxes.
Arjuna: Krishna, when "PK" landed on earth, his credit card and PAN card were stolen. So, he tries to understand Indian tax laws. So what could be his opinion on tax laws?
Krishna: Arjuna, "PK" enquires about PAN card from various people and he gets amazed after realising the actual situation. He is surprised to know that only 3.45 crore people pay income tax from the population of 125 crores and most of the people have taken PAN for fun and many people use fake PAN. After knowing about this PK says, "Humare Gole (planet) pe koi juth nahi bolta, aur hum confusiya gaye hai, yaha ka tax system dekh ke. Yaha kaun tax bhar raha hai aur kon nahi ye samaj nahi aata, thappa kaha hai tax bhar ne walo ka, kya pata." Further he expresses his opinion on the feelings of Indian citizens on fear, unawareness, tax evasion etc. in questionable and playful manner. When he goes to police station to lodge a complaint of his stolen PAN card, he is enquired about his Income Tax Return, bank account and books of accounts etc. He didn't understand anything and after overcoming his problem he gets his PAN card back.
Arjuna: Krishna, How does "PK" understand the color of money?
Krishna: Arjuna, when "PK" goes to purchase carrot and battery for his tape recorder the shopkeeper tells him in black it is for Rs. 200 and in white it is for Rs. 225. "PK" gets surprised and doesn't understand the difference of black and white. Then the shopkeeper explains to him that there are two types of money i.e. Black money and White money. If the purchaser wants a bill of Rs. 225 for his purchase then the seller has to pay sales tax & income tax and then it becomes white money. If the purchase is for Rs. 200 then bill will not be issued and shopkeeper will evade tax and hence it is black money. That means black money is tax evaded money. In India there is huge portion of black money. "PK" by seeing this black money says "Wrong numberva pe call lagat rahe hum sab, agar tax nahi bharoge toh lul ho jayegi Desh ki arthik halat."
Arjuna: Great Krishna, What are some funny things of income tax?
Krishna: Arjuna, when PK goes in the temple of Income Tax (Income Tax Office) and understands provisions, he gets astonished after understanding how the following provisions are:
1. Taxpayers who file income tax returns regularly, to them the department sends scrutiny notices, but who do not file returns, what happens to them? Hence, PK thinks, "Yaha to bolte kuch hai aur matlab kuch aur nikalta hai, jo tax bhar raha hai wohi mar raha hai."
2. Income tax department charges 12% p.a. rate of interest to the tax payers , but in case of refund gives only an interest @ 6% p.a. PK thinks,"Dusro se lete ho jaada aur dete ho kam, e kaisa hisab hua bhaiya?"
3. If a person who deducts TDS has not paid the same or filed the wrong information then the person whose TDS is deducted will not get the credit of it. PK's thoughts on this,"karni kisi aur ki aur bharni kisi aur ki."
4. In case of property transaction if property is sold for less than stamp duty value then the seller has to pay income tax on the difference. However the actual sales value is much more than the stamp duty value. And the difference is taken in cash as black money. After seeing these cash transactions PK thinks that, "Cash me aish karte hai saare."
Looking at these contrasting situations he says "Hamare gole par bahut hi simple tax system hai. Hum manager ke bharose nahi rehte, khud hi tax return bhar dete hai. Notice photice ka jhanjat hi nahi hai humare yaha. Phir bhi iss gole (Desh) main kar data kar bharta hai aur hasta hai yah badi acchi baat hai hum salam karta hu kar data ko. Apni duty nibhane me hi beauty hai bhaiya" Pay tax and relax.
Arjuna: Kya baat hai Krishna, What are the contradictions in case of VAT from the point of view of "PK"?
Krishna: Arjuna, when PK purchases goods, he understands the difference between with bill and without bill. So he comes to notice following contradictions in VAT:
1. While paying tax if tax payer purchases from Maharashtra then he gets VAT set off. However, if from whom he purchases, has not paid tax or does not file return then the purchaser will not get set off. Even he has to pay interest and penalty on it. Looking at this "PK" says "Yaha chor uchako chod samajdaro ko saja ho rahi hai bhaiya."
2. Tax payer appeals for his justice but he needs to pay part payment for the appeal to the government i.e. to get justice he needs to spend first. "PK" says "Insaaf pane k liye paisa kharch karna padta hai iha. Hala ki yah muft milna chahiye varna garibo ko toh kabhi insaaf nahi milega"
Arjuna: "PK"s opinion is right Krishna, now tell me views of "PK" on some contradictions in Service Tax?
Krishna: Arjuna, when "PK" goes to an air conditioned hotel, looking at service tax rate 12.36% his hunger vanishes and when he goes to a non-air conditioned hotel service tax was not levied in the bill amount. He says "Arey thandi hawa khane pe bhi is gole pe (Bharat Desh) tax lag raha hai bhaiyya, humare yaha toh muft mai milti hai thandi hawa!" Then he understood the controversies related to interest charged in service tax. The amount of interest which is being charged on service tax has risen to a great extent. If the tax payer delays the payment of service tax by one year then rate of interest is charged at 30% p.a. on the amount of service tax to be paid. Seeing this "PK" says "Tum toh dan dan pheke ja rahe ho, uchalne ki bhi limit hoti hai."
Upon Seeing the controversies related to various taxes such as Excise, Customs, LBT, Entertainment tax, RTO tax, Profession Tax, etc. PK fainted. When he woke up he said, "Yeh sach hai bhaiyya ki zindagi mai do chije picha nahi chodti ek hai maut aur dusra hai tax. Sare Bramand mai jitney gole (planets) hai, usse jyaada toh tax dikh rehe hai iha. Ab toh lagat hai ki aage direct tax code aur Goods and Service tax aane k baad hi kuch phursat hogi. Nahi toh aasman se nikle aur khajur pe atke ki halat ho jayegi sabki."
Arjuna: Krishna, What should tax payer learn from "PK"s point of view?
Krishna: Arjuna, "PK" is a character who thinks in a simple and pleasant way. He does not want any complications even if the subject is related to tax laws. It means to follow tax laws as they are. However as India is an Agrarian country most of the people depend on agriculture and agricultural income is tax free. Therefore, the tax structure is complicated. Government should not make these laws complicated. "PK" se ham aane wale sal main tension free rahna sikhe. From this story one should learn that,"Bhaiya sab baat ki ek baat "Kar" bhala to ho bhala. "PK" se ham bahut kuch sikhe".
Wish you all a very happy new year!
Dear, taxguru and karniti lover please give your views on above article.
Pay Compensation for illegal detention of goods by VAT Department : HC
M/s Sandeep Bulk Carriers Vs State Of U.P. And 3 Ors. (Allahabad High Court), Writ Tax No. 478 of 2014, Date: 19th December 2014
It is undisputed that the sole basis for detention of the tanker in question and seizure of the bitumen by the Respondent No.4 was the information collected by him from the toll plaza which revealed that last four digit of the registration number of the tanker in question was similar to the last four digit of registration number of a vehicle recorded in the records of toll plaza. It is also not disputed that the source of supply of bitumen from Mathura is only the Mathura Refinery of M/s Indian Oil Corporation. Even if there was some doubts about the genuineness of the invoice of bitumen accompanying the tanker in question, the Respondent No.4 who was a mobile squad officer of the department at Mathura should have verified the said invoice of bitumen from M/s Indian Oil Corporation, Mathura. But neither he took any steps in this regard nor the Joint Commissioner nor the Tribunal considered it appropriate to verify the invoice and the information and thus they mechanically passed the orders. For the reasons best known to the authorities concerned, they detained the tanker in question and seized the bitumen despite the fact that the information received was not tallying with the full registration number of the tanker in question. Registration number of three tankers containing similar last four digits are registered with the transport department as has been admitted by the Respondents in the supplementary counter affidavit. On verification from the Indian Oil Corporation, Mathura Refinery, Mathura it was found by the authorities concerned that bitumen in the tanker in question was loaded as per invoice accompanying it and thereafter it was not loaded from the Mathura Refinery till 30.6.2014. The bills of repair of the tanker in question in support of proof that it was under repair from the night of 28.6.2014 till 30.6.2014, were not even verified by the authorities concerned so as dispute its genuineness. In the supplementary counter affidavit dated 20.8.2014 the Respondents have even admitted that the tanker in question was detained and bitumen was seized without any basis.
In para 8 of the aforesaid supplementary counter affidavit dated 20.8.2014 the respondents stated that the application of the petitioner to unload the bitumen from his tanker was rejected on 7.2014 and the petitioner was directed to remove the tanker from the body of the engine and then to take away his vehicle. In my opinion even if such an order was actually passed by the respondent No.4, yet it was a complete nullity for reasons that firstly no power is conferred under the Act and the Rules to pass such orders, secondly it was wholly impossible to remove the mounted body of the fully loaded big tanker with bitumen weight 24.60 M.T. from body of the engine and thirdly the petitioner was directed merely to take away the body of the engine which could not be of any use for the petitioner who is engaged in the business of running his tanker on hire.
Respondents have also submitted unconditional apology by supplementary counter affidavit dated 8.2014. All these facts leaves no manner of doubt that the tanker in question was detained and bitumen continued to be seized illegally, arbitrarily and without any basis by the authorities for more than 58 days. The seizure itself was beyond the power conferred under Section 48 of the Act. The quantum of loss suffered by the petitioner as prayed for compensation in the writ petition has not been specifically disputed by the state respondents. The only stand taken by the respondent is that the quantum of damages cannot be determined in writ jurisdiction as held by division bench of this Court in Civil Misc. Writ Petition No. 67 of 2006 Raj Pal Road Lines (P) Ltd. Mumbai Vs. State of U.P. and others decided on 1.11.2010. Perusal of the aforesaid judgment shows that in that case the Division Bench found that it was doubtful whether the respondents are responsible for damage or solely responsible for damages inasmuch as some slackness on the part of the petitioners in that case was also found. In the present set of facts it is the admitted case of the respondents that the tanker in question was detained merely on the basis of similarity of last four digits of registration number of the tanker in question with the registration number of some other vehicles/tankers. The respondents acted most arbitrarily, and negligently in not verifying the information received by them from toll plaza so as to find out the complete registration number of vehicle and further not verifying the facts with regard to loading of the tanker in question from the Indian Oil Corporation, Mathura which they did while filing supplementary counter affidavit dated 20.8.2014. Even the reply dated 4.7.2014 (Annexure 8) submitted by the petitioner was not given any weight either by the respondent No.4 or by the Joint Commissioner. The Tribunal also acted mechanically.
Under the circumstances the impugned seizure order dated 5.7.2014, the order of Joint Commissioner under proviso to Section 48 (7) of the Act dated 8.7. 2014 and the impugned order of the Commercial Tax Tribunal, Bench-I, Agra dated 16.7.2014 passed in IInd Appeal No. 223/2014 cannot be sustained and are hereby set aside. The provisional release of the tanker and bitumen in question by order dated 28th August, 2014 is hereby confirmed. Any undertaking furnished by the petitioner before the Respondent No.4 pursuant to the order dated 28th August, 2014 is discharged.
Vehicle Detention & Seizure of materials under VAT Acts – Need for transparent directions
CA K. Jitendra Babu
1. Movement of the goods either on intra-state or inter-state basis has been proving as a night mare for the assessees and transporters, in view of the wide mis-use of the powers relating to inspection, detention and seizure by the VAT department in many of the States. 2. The vehicles are intercepted, detained and seized in routine, arbitrary, illegal and high-handed manner by the officers, citing obscure and irrelevant reasons. Vehicles are detained without valid reasons, replies filed by the assessees are routinely brushed out and seizure orders are made, with requirement of huge amount as deposit for release of the goods. The attitude of the quasi-judicial officers who are required to protect the State Revenue by following judicious process is disturbing the consciousness of the trade and industry at times.
3. Study of the various judgements relating to vehicle detention cases revealed that in most of the cases vehicles were detained, huge amount was ordered to be deposited for release of the vehicles and materials and finally penalties were levied confirming intention to evade payment of tax in a routine manner without any documentary evidence. Subsequently, such penalties were considered as the basis for arbitrary addition of turnover at the time of final assessment of the asseesees, holding intention to evade payment of tax was proved by penalties levied in seizure cases and therefore books of accounts are rejected and huge amount is added to the taxable turnover, as un-disclosed turnover. Invoice and/or stock transfer note issued by the assessees which accompany the vehicle prove that the materials were accounted in the books of accounts. Without any further investigation as to how the materials were not accounted in the books of accounts, huge amounts are added to the turnover without any basis. Principle that onus lies on the department to prove with documentary evidence, in case the department alleges evasion of tax, is being completely ignored, under the guise of revenue protection.
4. Minor defects in documentation were considered as the grave mistakes with an intention to evade payment of tax, without providing an opportunity to the dealer to explain and cure the defects in the documentation, ignoring judicial decisions wherein it was held that assessee should be given opportunity to rectify the minor mistakes in documentation. Every mistake in documentation is considered as the ploy on the part of assessees to move the goods on the same invoice/stock transfer challan once again.
5. Even the stock transfer of capital goods, which are never meant for sale, but for use in the factory or plant or network of the assessee, is doubted without any basis, vehicles detained, materials seized and released only on submission huge security deposit, citing minor defects in documentation.
6. In many of the cases, the Tribunals and Courts have set aside the penalties levied on the assessees for minor defects in documentation. But, the assessees are forced to face the inconvenience of moving the higher judicial forums to get justice, spending much of their time, energy and money, as no justice is expected from the departmental appellate authorities.
7. Height of arbitrariness and high-handedness of the revenue has once again been brought to the notice of the Hon'ble High Court of Allahabad in the recent case of M/s. SANDEEP BULK CARRIERS Vs. STATE OF U.P. [2014-VIL-404-ALH] and the Hon'ble Court after examination of the facts of the case ordered for payment of compensation to the transporter for illegal detention of the vehicle, allowed the writ petition with costs and directed the State and Central Governments for making suitable rules/orders to protect the assessees and transporters from illegal detentions.
8. The facts of the case reveal how indifferently the taxpayers are treated by the tax administration, which calls for immediate need for reforming the rules and procedures. While the tax evaders are to be punished with harsh penalties by intelligence gathering and scrutiny, tax compliant assessees should not be treated in an indifferent manner and illegal demands should not be slapped in the guise of protecting the State revenue.
9. In the above case, the vehicle carrying bitumen was on its way from Madhura in Uttar Pradesh to Bhopal in Madhya Pradesh, which started its way on 27.06.2014. During the transit, the vehicle got mechanical problems and same were got rectified by 30.06.2014. Then, the vehicle started it onwards journey to Bhopal again. The mobile squad officer intercepted the vehicle and detained the same, on the ground that he has got the information that the vehicle crossed the toll plaza which was away from its current location. The officer has apprehended that the material was unloaded after crossing the toll plaza, came back and going with material on the strength of same documents. Therefore, evasion of tax was apprehended and vehicle detained.
10.The officer has relied upon only on the last four digits of the vehicle number provided by toll plaza. It was found and submitted that there were three vehicles with same four last digits in the registration number, which were loaded by IOCL, Madhura. But, the submission was not taken into consideration and vehicle was detained for nearly 2 months.
11. Finally, the High Court has to deliver justice to the transporter after he experienced the difficulties for quite a long period of time moving from one forum to another for getting justice.
Some of the observations of the High Court are extracted hereunder which will throw light as to the manner in which the case was dealt with:
"For the reasons best known to the authorities concerned, they detained the tanker in question and seized the bitumen despite the fact that the information received was not tallying with the full registration number of the tanker in question". (para 14)
"Respondents have also submitted unconditional apology by supplementary counter affidavit dated 20.8.2014. All these facts leaves no manner of doubt that the tanker in question was detained and bitumen continued to be seized illegally, arbitrarily and without any basis by the authorities for more than 58 days. The seizure itself was beyond the power conferred under Section 48 of the Act…….. The respondents acted most arbitrarily, and negligently in not verifying the information received by them from toll plaza so as to find out the complete registration number of vehicle and further not verifying the facts with regard to loading of the tanker in question from the Indian Oil Corporation, Mathura which they did while filing supplementary counter affidavit dated 20.8.2014. Even the reply dated 4.7.2014 (Annexure 8) submitted by the petitioner was not given any weight either by the respondent No.4 or by the Joint Commissioner. The Tribunal also acted mechanically". (para 16)
"Under the circumstances the impugned seizure order dated 5.7.2014, the order of Joint Commissioner under proviso to Section 48 (7) of the Act dated 8.7.2014 and the impugned order of the Commercial Tax Tribunal, Bench-I, Agra dated 16.7.2014 passed in IInd Appeal No. 223/2014 cannot be sustained and are hereby set aside. The provisional release of the tanker and bitumen in question by order dated 28th August, 2014 is hereby confirmed. Any undertaking furnished by the petitioner before the Respondent No.4 pursuant to the order dated 28th August, 2014 is discharged". (para 16)
"In view of the above discussions the respondent No.1 is directed to determine the compensation within 30 days from today and to pay the amount of compensation to the petitioner by account payee bank draft within two weeks thereafter. The state government shall be at liberty to conduct an inquiry in the matter of illegal detention of the tanker and seizure of bitumen in question and may take action in accordance with law against the guilty officers/employees".(para 19)
"Now the last point that needs consideration is the undertaking of the State Government given through the learned Additional Advocate General and also of the Central Government as given by the learned Central Government counsel as recorded in paragraph 8 and 12 of this judgment. Learned Additional Advocate General has stated that State Government is considering to issue a government order to provide remedy including compensation for wrongs committed by government officers or employees. A statement has been made on behalf of the Central Government that the Department of Revenue, Ministry of Finance, Government of India, New Delhi is considering for making appropriate laws/guidelines/instructions which may have a check on the arbitrary exercise of power by authorities so as to minimise the possibility of harassment of transporters and dealers in general and to facilitate free flow of trade and commerce. Harassment and injury to persons particularly a person of poor class of society, by officers/employees of governments by their arbitrary, negligent and illegal actions can be effectively checked provided there is a law providing efficacious remedy for consequential liability of such officers/employees on one hand and on the other hand appropriate compensation to aggrieved person. Such a law/government order may also provide for speedy disposal of such matters. This shall also effectively check corruption. Learned Additional Advocate General for the State Government as well as the central Government Counsel have stated that the State Government as well as Central Government is considering to enact a law or to issue a government order for this purpose. Under the circumstances this Court hopes and trusts that the State Government as well as the Central Government shall consider the matter in the light of the undertakings as recorded in paras 8 and 12 above and may take appropriate decision/action in accordance with law preferably within three months from today". (para 20)
"In result the writ petition succeeds and is hereby allowed with cost of Rs. 20,000/- which the respondent No.1 shall pay to the petitioner within a month from today apart from compensation as directed above". (para 21)
Full Judgment can be accessed at the following link :-
12. In line with the assurance given by the Central and State Government representatives before the Hon 'ble High court to frame necessary rules/orders to facilitate smooth movement of materials and free flow of trade and industry, the rules/orders should be framed in such a way that the arbitrary powers of the authorities are curtailed and assessees should be allowed to carry on trade and industry with least hindrance.
13.The rules/orders should remove the powers of mobile squad officers or check post authorities to detain the vehicles, except in case of illicit transport of materials that are prohibited such as arms and ammunitions, drugs etc. The power to detain the vehicles is the root cause for the corruption, as any threat of detention would shake the transporter and the assessee, considering the financial implication on them and drives them into the net of corruption. The officers can carry out the investigation, subject to release of the vehicle immediately, by taking copies of the documents accompanying consignment, for subsequent probe at their end, if they apprehend tax evasion. Any evasion of tax can be handled based on the documentation and there is no need for detention of vehicles, seizure of materials, security deposit etc. Officers can get the information exchanged with their counter-parts in the other States and get the cases finalized in case evasion is proved.
14. In case of intra-state movement of the materials, the department has absolute control over the assessee, both consignor and consignee. Therefore, there is no obstacles in deciding the case and there is absolute no reason for detention of vehicle, seizure of the materials etc. In case of inter-state movement of the materials, originating from the State, the State VAT department has absolute control over the consignor and can take action against him in case of any evasion of tax, after scrutiny of the documents, since movement of goods on the same documents is not possible without connivance of the consignor. Therefore, there is no need for detention, seizure, security deposit etc. In case of inter-state movement originating from other State and moving through the State, the State VAT department can collect the documents, scrutinize the same and pass on the intelligence to their counter-parts in other States, to take action against the consignor/consignee located in other State(s). In this case also, there is no requirement of any detention, seizure, security deposit etc.
15. Keeping in view the practical situations faced by the departmental officers in the field, as to the various ways of evasion of tax by tampering with the documents, powers can be bestowed on them in specific cases/circumstances to protect the revenue, but not sweeping powers in each and every case.
- Trade and Industry should be taken into confidence while framing the rules and/or orders by the State and Central Governments, which would help in harmonious construction of rules and/or orders and avoid harassment to the assessees, reduce litigation and ultimately reduced burden on the courts.
(Author may be contacted onfcakoduri@gmail.com)
Penalty leviable even if service tax is paid before SCN
CA Sumit Grover
Recently, Hon'ble Karnataka High Court in the matter of K. Madhav Kamath Brother & Co. v. Asst. Comm. of Central Excise, pronounced that even if service tax is paid prior to Show Cause Notice, still the penalty shall be leviable u/s 76/78, 77 of Finance Act'94.
Brief facts of the case:
The matter pertains to the period Jan'06 to Oct'06. The department issued SCN for non-filing of return& non-payment of service tax along with the levy of penalty on the same(within the SCN itself) u/s 76/78 & 77 of Finance Act'94
However, the assessee deposited the service tax liability before issuance of SCN.
The assessee contended that since there wasn't any intention to evade service tax, and non-filing of returns/non-payment of tax was merely bonafide mistake, hence penalty couldn't be levied.
On appeal being filed before CESTAT-Bnglr,the tribunal rejected the plea of assessee and upheld the levy of penalty. Subsequently, appeal was filed before High Court.
The High Court also held that even if service tax is paid prior to issuance of SCN, it doesn't preclude from levy of penalty u/s 76/78 & 77 of ibid.
Comment :
The aforesaid judicial pronouncement pertains to Jan'06 to Oct'06, however, from 8th May'10, explanation 2 to section 73(3) was inserted to grant relief from penalty, but that too in case both(i.e. service tax as well as interest) were paid before issuance of SCN.
Therefore, it would be interesting to see if department can take advantage of the the said judgement for levying penalty in cases post May'10 wherein service tax was paid before issuance of SCN but interest wasn't deposited?
 | |||||||
Penalty leviable even if service tax is paid before SCN CA Sumit Grover Recently, Hon'ble Karnataka High Court in the matter of K. Madhav Kamath Brother & Co. v. Asst. Comm. of Central Excise, pronounced th... | |||||||
Preview by Yahoo | |||||||
__._,_.___
No comments:
Post a Comment